BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
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IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS FOR THE NIOBRARA, FORT HAYES, CODELL, AND CARLILE FORMATIONS, UNNAMED FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 535
DOCKET NO. 170700488
TYPE: SPACING
ORDER NO. 535-838
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REPORT OF THE COMMISSION
The Commission heard this matter on July 24, 2017, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to: 1) amend Order No. 535-3 to include the Fort Hayes, Codell, and Carlile Formations in the approximate 640-acre drilling and spacing unit previously established for Section 17, Township 9 North, Range 59 West, 6th P.M.; and 2) approve up to 16 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara, Fort Hayes, Codell, and Carlile Formations.
FINDINGS
The Commission finds as follows:
1. Carrizo Oil & Gas, Inc. (Operator No. 10338) and Carrizo (Niobrara) LLC (Operator No. 10439) (together, “Carrizo” or “Applicant”) is an interested party in the subject matter of the above-referenced hearing.
2. Due notice of the time, place and purpose of the hearing has been given in all respects as required by law.
3. The Commission has jurisdiction over the subject matter embraced in said notice, and of the parties interested therein, and jurisdiction to promulgate the hereinafter prescribed order pursuant to the Oil and Gas Conservation Act.
4. Rule 318.a., requires that, on unspaced lands, wells drilled in excess of 2,500 feet in depth be located not less than 600 feet from any lease line, and located not less than 1,200 feet from any other producible or drilling oil or gas well when drilling to the same common source of supply. Section 17, Township 9 North, Range 59 West, 6th P.M., is subject to this Rule for the Fort Hayes, Codell, and Carlile Formations.
5. On February 22, 2011, the Commission entered Order No. 535-3, which, among other things, established 163 approximate 640-acre drilling and spacing units, and approved the drilling of one horizontal well in each unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation. Section 17, Township 9 North, Range 59 West, 6th P.M., is subject to this order for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.
6. On September 19, 2011, the Commission entered Order No. 535-82, which, among other things, pooled all interests into the approximate 640-acre drilling and spacing unit established for Section 17, Township 9 North, Range 59 West, 6th P.M., and provided for the application of statutory cost recovery provisions under C.R.S. §34-60-116(7)(b)(II), for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.
7. On May 25, 2017, amended June 12, 2017, Carrizo, by its attorneys, filed with the Commission a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to: 1) amend Order No. 535-3 to include the Fort Hayes, Codell, and Carlile Formations in the approximate 640-acre drilling and spacing unit previously established for the below-described lands (“Application Lands”); 2) and to approve up to 16 horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the, Niobrara, Fort Hayes, Codell, and Carlile Formations, with the productive interval of the wellbore of any permitted wells in the unit to be located no closer than 150 feet from the productive interval of any other wellbore located in the unit, and no closer than 300 feet from a unit boundary, unless an exception is granted by the Director:
Township 9 North, Range 59 West, 6th P.M.
Section 17: All
8. Applicant states that any horizontal wells to be drilled under this Application will be drilled from no more than four multi-well pads on the Application Lands, or from a legal location on adjacent lands, without exception being granted by the Director.
9. On June 30, 2017, amended July 20, 2017, Carrizo, by its attorneys, filed with the Commission a written request to approve the Application based on the merits of the verified Application and the supporting exhibits. Sworn written testimony and exhibits were submitted in support of the Application.
10. Land testimony and exhibits submitted in support of the Application by Damian Katz, Landman for Carrizo, showed that Carrizo holds oil and gas leasehold interests and has a right to drill in the Application Lands. Land testimony also showed that in order to address concerns raised by the Bureau of Land Management, Carrizo agreed to increase the set back from the unit boundaries from the 300 feet requested in the Application to 600 feet.
11. Geologic testimony and exhibits submitted in support of the Application by Lindsay Aldrich, Geologist for Carrizo, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 320 feet thick, and is generally of uniform thickness throughout the Application Lands. Geologic testimony showed that Niobrara production is from three chalk zones known as the Niobrara A, B, and C Zones. Further testimony showed that the Niobrara Formation is a sequence of chalks, marls and limestones, and is a common source of supply. Geologic testimony and exhibits also showed that the Fort Hayes Formation is present throughout the Application Lands, is approximately 30 feet thick, and is generally of uniform thickness throughout the Application Lands. Further testimony showed that the Fort Hayes Formation is mainly limestone, and is a common source of supply. Geologic testimony and exhibits also showed that the Codell Formation is present throughout the Application Lands, is approximately 10 feet thick, and is generally of uniform thickness throughout the Application Lands. Further testimony showed that the Codell Formation is sandstone, and is a common source of supply. Geologic testimony and exhibits also showed that the Carlile Formation is present throughout the Application Lands, is approximately 70 feet thick, and is generally of uniform thickness throughout the Application Lands. Further testimony showed that the Carlile Formation is silty shale, and is a common source of supply.
10. Engineering testimony and exhibits submitted in support of the Application by Thomas White, Operations Engineer for Carrizo, showed that Carrizo plans to drill a total of 13 wells in the Niobrara A, B, and C Zones. The testimony further showed that Carrizo plans to drill three wells in the Codell Formation, but that the horizontal wellbore may deviate into the Fort Hayes and Carlile Formations, so those two formations also need to be included in the drilling and spacing unit. Engineering testimony and exhibits further showed that the drainage area for analog horizontal Niobrara Formation wells is estimated at 54.09 acres, the drainage area for analog horizontal Codell/Fort Hayes/Carlile Formation wells is estimated at 181.74 acres, and an approximate 640-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by 16 horizontal wells producing oil, gas and associated hydrocarbons from the three zones in the Niobrara Formation and from the Codell Formation.
11. The above-referenced testimony and exhibits show that granting the Application will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of hydrocarbons, and will not violate correlative rights.
12. Carrizo agreed to be bound by oral order of the Commission.
13. Based on the facts stated in the verified Application, having received no protests, and based on the Hearing Officer review of the Application under Rule 511, the Commission should enter an order to: 1) amend Order No. 535-3 to include the Fort Hayes, Codell, and Carlile Formations in the approximate 640-acre drilling and spacing unit previously established for Section 17, Township 9 North, Range 59 West, 6th P.M.; and 2) approve up to 16 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara, Fort Hayes, Codell, and Carlile Formations.
ORDER
IT IS HEREBY ORDERED:
1. Order No. 535-3 is hereby amended to include the Fort Hayes, Codell, and Carlile Formations in approximate 640-acre drilling and spacing unit established for the below-described lands, and a total of up to 16 horizontal wells within the unit are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara, Fort Hayes, Codell, and Carlile Formations:
Township 9 North, Range 59 West, 6th P.M.
Section 17: All
2. The productive interval of the wellbore of any permitted wells in the unit shall be located no closer than 150 feet from the productive interval of any other wellbore located in the unit, and no closer than 600 feet from the unit boundaries, unless the Director grants an exception.
3. All wells permitted under this Order shall be drilled from no more than four multi-well pads within the unit, or from a legal location on adjacent lands, unless the Director grants an exception.
IT IS FURTHER ORDERED:
1. The provisions contained in the above order shall become effective immediately.
2. The Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.
3. Under the State Administrative Procedure Act, the Commission considers this Order to be final agency action for purposes of judicial review within 35 days after the date this Order is mailed by the Commission.
4. An application for reconsideration by the Commission of this Order is not required prior to the filing for judicial review.
ENTERED this 10th day of August, 2017, effective as of July 24, 2017.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By: ____________________________________
James P. Rouse, Acting Secretary